Apr 8, 2010

Forex Crunch EUR/JPY – Fear sent it off the cliff – More to come?

Forex Crunch EUR/JPY – Fear sent it off the cliff – More to come?

EUR/JPY – Fear sent it off the cliff – More to come?

Posted: 08 Apr 2010 03:45 AM PDT


The forex markets are giving in to widespread fear about the Greek debt. We are seeing a full market reaction – a perfect risk aversive behavior, with one huge loser – EUR/JPY. Will it continue plunging?

Growing worries about the never ending Greek debt problems are strongly reflected in the market. I wrote about the 3 reasons why EUR/USD will be hit hard this time. So, the Euro, the  currency used in Greece, continues to fall. The failure of European leaders to end this crisis sends EUR/USD toward the 2010 low of 1.3267. But the Euro is not alone:

The currencies that benefit from fear are the US dollar and the Japanese Yen. The dollar is rising across the board. The British Pound is dropping despite excellent figures from Britain – A strong rise in prices, as seen in the Halifax HPI and a 1.3% rise in Manufacturing Production, double than expected, are only enough to ease the fall.

USD/CAD parity – that was reached earlier this week, is fading away. The pair is getting close to 1.01 despite having all the reasons to fall. Also the Australian dollar, which got good (though expected) job figures is dropping on the dollar’s strength.

Yen enjoys Chinese talks

Now let’s look at the other currency that benefits – the Japanese yen. The yen enjoys the same status as the greenback – the “safe haven” currency that is sought in times of crisis. That’s not the only reason pushing the yen.

Chinese officials are hinting that they will release the tight Yuan peg and let it strengthen. More expensive Chinese goods mean better competition conditions for Japanese goods. This also boost the yen: USD/JPY is below 93.

EUR/JPY tumbling down

Take EUR/USD and USD/JPY and you get an accelerated reaction in the cross: EUR/JPY, a popular cross, dropped below the 125.20 line that held it just yesterday and also worked as a resistance line twice in February and March. The pair descended quickly to 123.67 and the fall continues.

The next line of support is at 121, followed by 119.60, which is the year-to-date low for the pair.

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Australian Jobs Aren’t Enough Against the Greenback Strength

Posted: 08 Apr 2010 12:38 AM PDT


Australian job figure were inline with expectations. This was enough for the Aussie against the Euro, but not against the greenback. Update on the Aussie.

Background: earlier this week, the Australian central bank, RBA, raised the rates to 4.25%, far higher than the rest of the world. Some analysts anticipated this move, but there was no consensus. The Aussie moved higher, breaking above March 17th high 0f 0.9250, and getting close to the ultimate resistance line of 0.9327. A surprise in job figures could push it higher. But something else happened:

The second major release for this week was only OK – not even slightly better. The Australian employment change figure showed a gain of 19,600, almost perfectly matching the early expectations. The downside was a revision of last month’s number to a loss of 4,700, down from a gain of 400 jobs. This downside revision wasn’t too bad, but didn’t contribute to rises.

The second figure was also inline with expectations – unemployment rate remained at 5.3%, exactly as expected.

AUD/USD reaction and technical lines

AUD/USD initially reacted with a small rise from 0.9260 to 0.9280, but this didn’t last. The dollar bulls came out in the London session and sent the pair down to 0.9240. At least these levels are above the ones seen before the rate hike.

It’s important to note that this small drop comes on the dollar strength and not on the Aussie’s weakness. The Australian dollar is enjoying strength against the Euro – a new record low below 1.44.

The levels to watch are 0.9190 which is a minor support line, followed by the 0.9090 line which has proved to be a stronger one. The next line of support is at 0.8980, a swing low.

Looking up, 0.9250 is a notable line, but has been quite shattered. 0.93, being a round number and the high figure that the pair reached yesterday, is another small hurdle. The big hurdle is 0.9327 – a line that the Aussie failed to breach many times.

There are no major Australian events until the end of the week. AUD/USD will continue to move according to US dollar bulls and bears, until next week’s Australian figures.

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Forex Daily Outlook – April 8th 2010

Posted: 07 Apr 2010 12:00 PM PDT


A very busy day expects forex traders: rate decisions from Europe and Britain, Australian employment figures and the weekly jobless claims are the highlights. Let’s see what’s up.

The Canadian dollar doesn’t receive any figures today, but it will still draw attention. USD/CAD parity is here for the first time in 20 months, and it seems that it’s here to stay. OK, let’s start the review:

Australia provides a strong start to the day with the employment figures. Employment Change is predicted to show a gain of 20,200 jobs while the Unemployment Rate will probably remain unchanged at 5.3%. This might push the Aussie towards important 0.9327 resistance line.

For more on the Aussie, read the AUD/USD forecast.

A day after the rate decision, Japan’s BOJ Monthly Report is released and can shake the yen. This will give another view on the economy. Also note the Economy Watchers Sentiment.

In Switzerland, the Unemployment Rate is predicted to remain unchanged at 4.1%.

British Manufacturing Production will probably rise by 0.7% after dropping by 0.9% last month. This will be a prelude to the main event.

The last British rate decision before the elections isn’t expected to bring any changes: the Official Bank Rate is expected to remain unchanged at 0.5%. Also the Quantitative Easing program will probably not receive new funds, and will remain on 200 billion pounds.

It will be interesting to see if Mervyn King will release any negative statements about the economy in the MPC Rate Statement – this might shake the volatile pound.

There’s still one more British figure – the NIESR GDP Estimate which is usually an accurate and fresh indicator for the government’s figure. It showed a growth rate of 0.3% for the 3 months that ended in February, and will now show the first quarter in full.

For more on the Pound, read the GBP/USD forecast.

In Europe, two figures are due before the rate decision: Retail Sales, which fell by 0.3% last month, will probably remain unchanged this time. In Germany, that Industrial Production is predicted to rise by 0.7%. Factory Orders were better than expected, so we can see a positive surprise here as well.

Jean-Claude Trichet isn’t expected to move the European Minimum Bid Rate from 1%. With a stagnant economy, there’s no reason for a move. It will be interesting to hear his comments about Greece and other debt laden countries in the ECB Press Conference.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In the US, Unemployment Claims are expected to continue dropping, indicating a real improvement in the economy. A drop from 439K to 433K is expected.

A day after Ben Bernanke’s speech, we have a few more speeches from FOMC members: Elizabeth Duke, Daniel Tarullo and Donald Kohn will all make public appearances.

That’s it for today. Happy forex trading!

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